LTL Management, a Johnson & Johnson affiliate, files for chapter 11 to equitably and permanently resolve all current and future talc-related claims against it
Clients LTL Management LLC
Jones Day represents LTL Management LLC in its chapter 11 bankruptcy case filed on October 14, 2021 in the Western District of North Carolina. LTL Management filed for chapter 11 to equitably and permanently resolve all current and future talc-related claims against it by confirming a plan of reorganization that would, among other things, establish and fund a trust to resolve and pay such claims – notwithstanding that LTL Management continues to stand behind the safety of its cosmetic talc products and does not believe the claims have merit.
LTL Management, similar to Aldrich Pump LLC, Murray Boiler LLC, DBMP LLC, and Bestwall LLC, was formed as part of a corporate restructuring of the former Johnson & Johnson Consumer Inc. ("Old JJCI"). Through the restructuring, LTL Management was allocated talc-related liabilities of Old JJCI and certain assets, including the equity of an over $350 million royalty management and finance business. The restructuring was designed to ensure that LTL Management has the same, if not greater, ability to pay talc claims as Old JJCI did prior to the restructuring. This was accomplished through the establishment of a funding agreement with Johnson & Johnson, LTL Management's ultimate parent, and Johnson & Johnson Consumer Inc. ("New JJCI"), which also was formed in the corporate restructuring and is LTL Management's direct parent. In addition, Johnson & Johnson and New JJCI have committed to advance $2 billion under the funding agreement to fund a qualified settlement trust for the payment of current and future talc-related claims against LTL Management.
The talc claims for which LTL Management seeks a complete resolution mainly target Johnson's Baby Powder as a purported cause of ovarian cancer and mesothelioma. Prior to the chapter 11 filing, Old JJCI was subject to a virtual tidal wave of claims, most of which were asserted during the last five years,and it was anticipated that claims would continue to be filed for decades more. In addition, while Old JJCI had success in defending the claims, Old JJCI and Johnson & Johnson suffered a few blockbuster plaintiff verdicts that inspired plaintiff firms to file even more cases. The flood of cases generated astronomical costs, with Old JJCI having incurred almost $1 billion defending talc claims, nearly all of which was spent in the last five years, as well as about $3.5 billion for settlements and verdicts. At the time of the chapter 11 filing, LTL Management was a defendant in nearly 40,000 talc-related lawsuits throughout the United States and was paying anywhere from $10 million to $20 million in defense costs on a monthly basis.
In connection with LTL Management's chapter 11 case, LTL Management sought an order from the bankruptcy court declaring that the automatic stay under section 362(a) of the Bankruptcy Code prohibits the commencement continuation of talc-related claims that were or could have been asserted against Old JJCI against various protected parties, including LTL Management's non-debtor affiliates (such as Johnson & Johnson and New JJCI), third party retailers, and insurance entities while LTL Management's chapter 11 case remains pending. In the alternative, LTL Management requested a preliminary injunction under section 105(a) of the Bankruptcy Code enjoining the prosecution of such claims outside of LTL Management's chapter 11 case.
On November 10, 2021, the North Carolina bankruptcy court extended the stay to the protected parties and enjoined the prosecution of talc-related claims against such parties for a period of 60 days. The court also determined to transfer LTL Management's case to the District of New Jersey. Following transfer to the District of New Jersey, the official committee of talc claimants and certain claimant law firms objected to LTL Management’s request that the New Jersey bankruptcy court extend the stay to the protected parties and continue to enjoin the prosecution of talc-related claims against such parties. The official committee of talc claimants and certain claimant law firms also filed motions to dismiss the chapter 11 case as a bad faith filing.
The New Jersey bankruptcy court held hearings on the motions to dismiss and the extension of the automatic stay from February 14 to February 18, 2022. On February 25, 2022, the court entered two memorandum opinions denying the motions to dismiss the chapter 11 case and granting LTL Management’s request to extend the stay to the protected parties and enjoin the prosecution of talc-related claims against such parties. In denying the motions to dismiss, the New Jersey bankruptcy court found that "the filing of a chapter 11 case with the expressed aim of addressing the present and future liabilities associated with ongoing global personal injury claims to preserve corporate value is unquestionably a proper purpose under the Bankruptcy Code." Memorandum Opinion, In re LTL Management LLC, Case No. 21-30589 (MBK), Dkt. 1572 at 16 (Bankr. D.N.J. Feb. 25, 2022). The New Jersey bankruptcy court's decisions on the motions to dismiss and the extension of the automatic stay to the protected parties are currently being appealed.
At a hearing on March 8, 2022, the New Jersey bankruptcy court appointed the Hon. Joel Schneider (Ret.) and Mr. Gary Russo as co-mediators in the chapter 11 case. The court subsequently entered a mediation protocol motion on March 18, 2022.